A semi-retired mate who sold his business in 2003 and now lives in Spain was a house guest for a night chez Sharkey last week. He’s an interesting character, a guy who has invested in shares for at least three decades and now plays the saxophone in a Spanish jazz quartet.

It’s always good to bounce ideas off like-minded folk, to hear their interpretation of matters and circumstances that can often appear as plain as the nose on your face, but which, when viewed from a different perspective, assume a radically contrasting hue.

Like my pal, I’m much more of a saver than a borrower, although unlike him, I still have a rump of borrowing I’m eager to eradicate while interest rates remain at an historic low. His reaction to this near-term strategy was unexpected – he believed that with rates so ridiculously low, surely this was an ideal time to increase personal borrowing rather than pay down debt.

Assuming you’re in the market to borrow, there is undoubtedly merit in such an argument, provided you can borrow at reasonable cost, but I’m not and before rates start heading north again, perhaps in two years’ time, I would like to reduce debt as much as possible. Statistics suggest I’m not alone in harbouring such an ambition.

Savers and investors outnumber borrowers by a factor of six and, as the first group accept that there’s little chance of savings returns improving in the near future, should  they have any existing borrowing, reducing capital balances currently looks like a very sensible use of cash.

Base rates have been at their present level of 0.5% since March 2009 and most people are now used to them being there. But this is by no means their ‘neutral’ level, which is closer to 4% – 5%. If few saving opportunities present themselves, it seems quite natural to pay down debt, although not entirely at the expense of saving, because when interest rates start motoring again (and they will), a large swath of borrowers are in for an almighty shock.

However, unless you have a lump sum with which you can comfortably remove borrowing in one fell swoop, there is great merit in allocating at least a proportion of your monthly / quarterly ‘surplus’ to investment.

While this is easier said than done, those in a position to should ignore property, bonds, gold and cash and instead invest in equities. Here, my pal and I agreed – not just because according to a report published last week, shares remain the best asset class for long-term investing.

A mammoth study by the London Business School (LBS) on behalf of Credit Suisse covering the 112-year period since 1900 found that the average real (ie, after inflation) annual return on UK shares is 5.2%. Over the same period, bonds have yielded 1.5%, property 1.3% and cash a paltry 1%

Furthermore, the impressive performance of shares for more than a century is not attributable to wonderful company management or even the miracle of compound interest, courtesy of reinvesting dividends, but to an ‘equity risk premium’ which, according to the LBS authors, has averaged around 3.5%.

They suspect it will hover around the same level in future – enough, surely, to persuade savers and investors to ensure a proportion of any ‘spare’ capital is invested, either directly or indirectly, into the stock market.